Before the founding of the People’s Republic of China in 1949, in this weakened giant of a country with a population of nearly 500 million people and a territory of 9.6 million sq km the highest annual outputs of major industrial and agricultural products were as follows: yarn 445,000 tons, cotton cloth 2.79 billion m, raw coal 61.88 million tons, generated energy 6 billion kwh, grain 150 million tons, and cotton 849,000 tons. This was the starting point of the economic development of the new China.

After 50 years’ planned and large-scale economic construction, China today is one of the major economic powers with the greatest potential of development in the world, and its people live a comparatively well-off life as a whole. From 1953 to 2000, China had successfully completed nine five-year plans and marked achievements had been made, laying a firm foundation for future economic development. Since the implementation of reform and opening-up in 1979, China’s economy has grown at an unprecedentedly rapid speed.

Increases in the Gross Domestic Product (unit: 100 million yuan)

I978 3,624.1

1985 8,964.4

1990 18,547.9

1995 58,478.1

2000 89,403.6

2001 95,933.0

Economic restructuring is one of the main aspects of China’s reform. In the first 30 years after the founding of the PRC, the Chinese government carried out a system of planned economy, and targets and quotas for various spheres of economic development were all set by the special “planning committees” of the state. Factories produced goods according to state plans, and farmers planted crops also according to state plans. Commercial departments replenished and sold their stocks according to state plans, and the qualities, quantities and prices of the goods were all fixed by planning departments. On the one hand, this system contributed to the stable, planned development of China’s economy, but on the other it also limited the development of the economy and sapped its vitality. At the end of the 1970s, mindful of the gap in economic growth between China and other countries China’s leaders made a great decision to reform China’s decades-old economic system.

The reform began first in the rural areas in 1978, when the household contract responsibility system was introduced there. Under this system, farmers got the right to use the land, plan farmwork and dispose of products independently. State monopoly of the purchase and marketing of agricultural products was eliminated; the prices of the majority of farm products were freed; many policies restricting agricultural development were abolished; and farmers were allowed to go in for diversified business and set up township enterprises. All this had greatly aroused the farmers’ enthusiasm for production.

In 1984, the economic restructuring shifted from the rural areas to the cities.

After ten-odd years of reform and opening-up, in 1992 the Chinese government formulated a policy to establish a market economy. According to the official documents, the main aspects of the economic structural reform are as follows: The development of diversified economic elements will be encouraged while keeping the public sector of the economy in the dominant position. To meet the requirements of the market economy, the operations of state-owned enterprises should be changed so that they fit in with the modern enterprise system. A unified and open market system should be established in the country so as to link the rural and urban markets, and the domestic and international markets, and to promote the optimization of the allocation of resources. The function of managing the economy by the government should be changed so as to establish a complete macro-control system mainly by indirect means. A distribution system in which distribution according to work is dominant while giving priority to efficiency with due consideration to fairness should be established. This system will encourage some people and some places to become rich first, and then they may help other people and places to become rich too. A social security system, suited to China’s situation, for both rural and urban residents shall be worked out so as to promote overall economic development and ensure social stability.

In 1997, the Chinese government stressed that the non-public sectors of the economy are an important component part of the socialist economy of China, in which profitability is encouraged for elements of production, such as capital and technology, making the economic restructuring march forward in bigger strides.

In 2001, reform in various fields was carried out smoothly, and saw great achievements. At present, a socialist market economy system is well on the way to being established in China, and the basic role played by the market has been improved in the sphere of resources allocation. At the same time, the macro-control system has basically taken shape. Moreover, the extensive mode of economic growth is being replaced by an intensive mode. According to the plan, the socialist market economy will be further improved by 2010, and by 2020 a comparatively mature socialist market economy structure will have been established in China.